Skip to content

CROSSCOR Valuations & Forensics Inc.

Blog

Contact Us (949) 264-1455

Cash Flow for Support

Posted on January 19th, 2019

I often calculate the cash flow for support in my divorce cases. My calculation is used as the basis for child and spousal support orders. While cash flow for support seems like a phrase that defines itself, it has created so much controversy. Cash flow is more obvious among employees. It’s their paycheck. With some exceptions, business owners also receive a paycheck because they are employees of their business. Paychecks are straightforward. Business owners also receive cash and benefits from their business. This is the controversy.

Sources of Cash from the Business

A business has three sources of cash. Its profits (income) are usually the main source unless the business is legitimately struggling. However, its profits can be artificial. Business owners “run” personal expenses through their business. The business pays for their personal expenses and then deducts them as business expenses. The more business expenses a business has, the less its profits. As a divorce forensic accountant, I “add-back” any personal expenses to arrive at the “true” profits of the business. The business owner’s paycheck and its true business profits are the basis for their cash flow for support. A business can also get cash from loans and from selling its assets. While they are sources of cash, they are not sources of cash flow for support.

Marital Lifestyle Paid by the Business

As discussed, the business pays for personal expenses, which often benefits the family. The benefits would be less if the business paid taxes on the “true” profits instead of deducting the personal expenses. I’ve had cases where the family lives on the cash from loans by the business. This is not cash for support. The loans should instead be used for paying its vendors or buying equipment. As a forensic accounting expert witness, I’d argue that loans are investments that should generate cash to repay the lender with leftover profits. Some businesses sell equipment that were once useful. I’ve had cases where the family enjoys this occasional source of cash. This too is not cash for support.

Cash flow for support is controversial and often requires a divorce forensic accountant. If you want to discuss the profits of a business, please call Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Divorce Forensic Accountant Expert Witness

Posted on January 16th, 2019

Half of marriages end in divorce. That’s what they say. But even if you are a statistic, you may not need a divorce forensic accountant. However, you will need one when you and your spouse become litigants over the income and value of a business. In divorce litigation, the parties do not agree on the value of the business and its income. The disagreement in value increases when the business was separately owned before marriage. Unlike the operator of the business, the non-operator often believes the value is higher. They also believe the income and cash profits generated by the business is much higher. These are complex issues and we are here to “simplify the complex.” In other words, if accounting were a language, we’d speak in plain English to the attorneys and their clients.

Forensic Accounting Expert Witness in Orange County

A divorce forensic accountant is a CPA qualified to testify in court as an expert on accounting and financial matters in family court. As a forensic accounting expert, our work is credible and admissible in court. While we are there for the attorneys and their clients, we are also there to help the court make a decision. If you own a business, our first task is to calculate your income over a specific period. Our calculation then becomes the basis for the court’s child and spousal support orders.

Divorce Businesses Valuations in Los Angeles County

We calculate the value of the business. The value of a business and its income is controversial. The personal expenses paid for by the business is one of the most common controversies. Businesses often classify personal expenses paid by the business as business expenses. This lowers the profits of the business. A business is more valuable when its profits are higher. The owner of a business has a separate property interest if they owned the business before marriage. Forensic accountants allocate the value of the business between separate and community interest using the language in the Pereira Van Camp divorce cases.

Divorce forensic accounting is a highly specialized CPA practice. While there are thousands of CPAs in Southern California, there are very few in Orange County and Los Angeles County, who qualify as divorce forensic accounting experts. When you’re contemplating divorce litigation, please call Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Divorce Financial Mediation in Orange County

Posted on January 14th, 2019

Divorce is a process. It is usually simple, inexpensive and does not often require an attorney. The process can be lengthy and expensive when the financial issues are complex. If the marital home was transmuted during marriage, then it is more complicated to divide. Transmutation means that the character of the marital home changed from separate to community property. It is also more complicated to divide a business owned separately before marriage and that appreciated during marriage. Most people hire a family law attorney in such cases as their first step in the divorce process. But the process may lead to litigation.

We Are Divorce Financial Mediators

Hiring a divorce attorney is common and necessary in many cases. They know the law. However, family law attorneys hire forensic accountants as expert witnesses in cases involving property division. Therefore, if you use a mediator that is also a divorce expert witness, then your financial results may be similar to litigation. Greg believes that mediation is an alternative to litigation. His goal is to save your “wealth,” which is your money, time and emotion. Greg’s clients must agree to his principles before he mediates their divorce. They must agree to prevent litigation, preserve their wealth and prepare for independence. Simply, they must prevent, preserve and prepare. His approach is mindful of your “limited” wealth and is the foundation for the successful division of your property.

It is a common belief that only a family law attorney can mediate your divorce. A simple Google search will prove otherwise. If you and your spouse agree that divorce financial mediation is the best for you, then please contact Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Mindful Divorce Financial Mediation

Posted on January 11th, 2019

When we refer to “wealth” in a divorce, we aren’t just talking about money (assets). Wealth also includes your time and emotion. Those are important things in your life that you have to preserve when possible. You don’t have an endless supply of money, time and emotion, so you have to make sure that you’re using them wisely. When you are going through a divorce, you spend money. Often times more money than you expect. However, you don’t immediately realize you are also spending more time and emotion. We are mindful of what you spend. So, our forensic divorce mediation can make sure that you spend less so that you have more for your life ahead.

Best (for You) Divorce Financial Mediation

The foundation of forensic divorce mediation is simple: It’s to prevent litigation, preserve your wealth and to prepare for independence. This is what distinguishes us. Litigation is unpredictable because you cannot control the result. Your wealth will be at risk. And you may not even get more money (assets). But if you do, at what cost? Litigation is never swift. It will consume your time and deplete your emotions. Many times, divorce litigants are so exhausted, they just want it to end. These are the reasons we suggest forensic divorce mediation. It minimizes the uncertainty and the unpredictability. In turn, it maximizes your wealth, so that you can better prepare for independence. Imagine your wealth as fruit. It is always better to have half a melon instead of half a grape.

Divorce is never an easy process. Our divorce financial mediator has been through a divorce himself. So, he knows what you’re going through and is very mindful about preserving your wealth. To learn more about divorce financial mediation, please call Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Alternatives to Divorce in Los Angeles

Posted on January 9th, 2019

The process of getting married is relatively fast. Most would agree that getting divorced is not. It takes at least six months in California when the divorce is uncontested. The process is longer when there are complex financial issues. There are two common disagreements. The parties often disagree with the community’s interest in the marital home acquired before marriage. Refinancing the marital home during marriage adds to the complexity. The parties also do not often agree with the value of the community’s interest in the business separately owned before marriage. The divorce process takes longer when the disagreements are larger. The backlog of divorce cases adds months. The family courts sometimes take years before they resolve contested financial issues. I have been a part of many such cases. However, there are alternatives to divorce.

A Faster Divorce with Livable Results

A faster divorce means you must use alternatives to divorce. Mediation is one such alternative. In divorce mediation, you must invest more effort instead of money. Litigation is sometimes a bad investment. It does not buy speed. It may also not buy the best results. I would argue your effort is the same you’d invest when buying the perfect home or planning the perfect vacation. The effort you invest must be intellectual. Marriage is a financial and emotional union. So, this is often difficult. I believe there three principles to mediating your divorce. Both of you must first agree to “prevent” litigation. Second, both of you must agree to “preserve” your wealth. Lastly, both of you must agree to eventually “prepare” for independent lives.

Forensic CPA as a Divorce Mediator

Once you both agree to prevent litigation, you need to choose a mediator. Most people choose attorneys. They are the logical choice. Sometimes, people don’t think there are alternatives to divorce mediators. Besides attorneys, other professionals provide divorce mediation. I am a family law forensic CPA specializing in divorce. Divorce attorneys use me when they need an expert opinion on complex financial issues. I use the same financial approach in mediation as I do in litigation. My mediation process is the difference.

If you believe in preserving your wealth and are looking for alternatives to divorce in Los Angeles, then please contact Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Is More Moore-Marsden Work More Persuasive?

Posted on January 7th, 2019

I recently spoke with a potential client. She was on her second family law attorney. Her divorce forensic CPA already charged her $5,000. He wanted another $5,000 to finish the task. It was a Moore-Marsden calculation. He hadn’t produced anything. She needed him to trace all her separate property funds for real estate she purchased during marriage. It was under her name. The tracing only involved two sources. But there were multiple bank accounts. The first was her separate property funds before marriage. The second was her income during marriage from her other separate property. Her husband claimed that the subject property was community property. She had the burden to prove that is was hers. She provided me with key documents. I analyzed them for an hour. Afterwards, I spoke to her for 1.5 hours. I quoted her a fixed fee. It was less than $5,000.

Same Moore-Marsden, Two Different Costs

How could two forensic accountants have hugely different costs for the same calculation? We could have different hourly rates. Her forensic CPA’s hourly rate was less than mine. So his fees should not be double mine. We could have different approaches. Her forensic accountant wanted too much information. The amount of information often required by a forensic CPA is subjective. You only need relevant information to be persuasive. You do not need unnecessary information. He required all the deposit slips. Most of the deposits were her wages. Her wages were community property. It was undisputed. His approach was from the both sides of the coin: The deposits and withdrawals. He should have just traced the withdrawals from her wages that were used for the subject property. If her wages were not used for the subject property, then tracing the deposits would’ve been irrelevant and costly.

Inefficiencies in a Moore-Marsden Calculation

Litigation is expensive. It will be more expensive when you are inefficient. You need to make an honest investment in time and thought to be efficient. I invested 2.5 hours with my potential client. I quoted her a fixed fee. Since litigation is unpredictable, I rarely quote fixed fees. I believe that this was a straightforward Moore-Marsden calculation. It only required the proper tracing approach. I also believe her forensic accountant may not have made the honest investment. He required all the deposit slips. So he may have placed an equal importance on the deposits and withdrawals. But not everything is equally important. Despite my investment, I suggested that she finish with her forensic CPA. I also suggested that she speak to other forensic accountants.

If you need an efficient Moore-Marsden expert witness in Orange County or Los Angeles County, then please call Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.


Incomplete Opinions In A Divorce Mediation

Posted on January 4th, 2019

My client hired me as her consultant. She was in the middle of a divorce mediation. It was an alternative to litigation. The parties hired a neutral forensic CPA. He calculated her husband’s income available for support. The new tax law for alimony will change on January 1, 2019. Spousal support from orders filed by December 31, 2018 will be treated under the old tax law. Her husband wanted to settle the alimony before January. It was to his tax advantage. However, the forensic accountant’s opinion was based on incomplete information. But it would take more time to gather complete information. Time was against her husband. So he pressured my client to settle for a lower alimony. She believed that the spousal support would be higher with complete information.

CREATIVE SOLUTIONS IN A DIVORCE MEDIATION

My client was in a pickle. She wanted to avoid litigation. But she didn’t want to rush her decision. Her decision would be based on the forensic accountant’s report. Her husband wanted to use the report. It concluded he made less income. However, the opinion was based on incomplete information. Incomplete information means incomplete opinions. I told my client an incomplete opinion is better than a guess. I wanted her mediation to succeed. She believed mediation had many benefits. But she didn’t want to wait for additional information. I had to provide a “creative” solution. So I told her to leverage two things for a higher alimony. She can leverage the report’s incomplete opinion. She can also leverage her husband’s desire to settle before 2019. I told her that you often get what you negotiate instead of what you deserve.

If you need a family law forensic accountant in Orange County or Los Angeles County as a consultant in your divorce mediation, then please call Greg Raffaele at (714) 335-4646 for a free one-hour telephone consultation.